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HomeMy WebLinkAboutBeartooth Resource Conservation and Development Area Inc. 12.31.2019 ReportBea rtoot h Peso u rce Conservation and Development Area, Inc. Financial Statements and Independent Auditor's Report Year Ended December 31, 2019 Building Slrangelf COmffiunfliex a"iambPeo Beartooth Resource Conservation and Development Area, Inc. Year Ended December 31, 2019 Table of Contents Independent Auditor's Report.....................................................................................................1 Financial Statements Statement of Financial Position.......................................................................................................................3 Statementof Activities.......................................................................................................................................4 Statement of Functional Expenses..................................................................................................................5 Statementof Cash Flows....................................................................................................................................6 Notes to Financial Statements.........................................................................................................................7 Independent Auditor's Report Board of Directors Beartooth Resource Conservation and Development Area, Inc. Joliet, Montana Report on the Financial Statements We have audited the accompanying financial statements of Beartooth Resource Conservation and Development Area, Inc. (the "Organization"), which comprise the statement of financial position as of December 31, 2019, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Beartooth Resource Conservation and Development Area, Inc. as of December 31, 2019, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States. LLP Wipfli LLP Billings, Montana December 23, 2020 2 Beartooth Resource Conservation and Development Area, Inc. Statement of Financial Position As of December 31, 2019 ASSETS Current Assets Cash Accounts receivable Accrued interest receivable Loans receivable - current portion, net of allowance for doubtful accounts of $422,170 Prepaid expenses Cash restricted to revolving loan fund Fixed Assets Property and equipment Accumulated depreciation Other Assets Loans receivable - long-term portion TOTAL ASSETS LIABILITIES AND NET ASSETS Current Liabilities Accrued expenses Notes payable - current portion Long Term Liabilities Notes payable - long-term portion Net Assets Without donor restrictions - undesignated With donor restrictions TOTAL LIABILITIES AND NET ASSETS See accompanying notes to financial statements. $ 152,925 31,641 83,055 337,391 1,717 605,739 469,341 25,179 (16,179) 9,000 693,813 $ 1,778,893 $ 30,252 40,461 70,723 558,709 164,622 984,839 1,149,451 $ 1,778,893 3 Beartooth Resource Conservation and Development Area, Inc. Statement of Activities With donor Restrictions - Without Donor Revolving Loan Year Ended December 31, 2019 Restrictions Fund Total REVENUE Grants Dues Program services Interest Other revenue Bad debt recovery Net assets released from restrictions Total Revenue EXPENSES Loan and economic development programs Management and general Total Expenses CHANGES IN NET ASSETS NET ASSETS - Beginning NET ASSETS - Ending See accompanying notes to financial statements. $ 214,383 $ - $ 214,383 37,907 - 37,907 5,000 - 5,000 845 71,801 72,646 - (20) (20) - 25,608 25,608 13,539 (13,539) - 271,674 83,850 355,524 209,700 - 209,700 65,573 - 65,573 275,273 - 275,273 (4,599) 83,850 79,251 169,221 900,989 1,070,210 $ 164,622 $ 984,839 $ 1,149,461 4 Beartooth Resource Conservation and Development Area, Inc. Statement of Functional Expenses Loan and Economic Development Management Year Ended December 31, 2019 Programs and General Total FUNCTIONAL EXPENSES - WITHOUT DONOR RESTRICTIONS Contractual $ 11,093 $ 15,600 $ 26,693 Depreciation - 4,002 4,002 Interest 8,192 - 8,192 Miscellaneous 5,290 5,290 10,580 Rent 2,821 498 3,319 Repairs and maintenance 1,418 946 2,364 Salaries and benefits 171,589 25,646 197,235 Supplies 4,901 8,345 13,246 Telephone 616 2,466 3,082 Travel 3,780 3,780 7,560 See accompanying notes to financial statements. $ 209,700 $ 66,573 $ 276,273 5 Beartooth Resource Conservation and Development Area, Inc. Statement of Cash Flows Year Ended December 31, 2019 CASH FLOWS FROM OPERATING ACTIVITIES Increase in net assets $ 79,251 Adjustments to reconcile increase in net assets to net cash from operations: Noncash recoveries of bad debts (2,608) Depreciation 4,002 (Increase) decrease in: Accounts receivable (4,545) Accrued interest receivable (4,355) Increase (decrease) in: Accrued expenses 6,345 Net cash flow from operating activities 78,090 CASH FLOWS FROM INVESTING ACTIVITIES Disbursements of loans receivable (240,127) Payments on loans receivable 140,030 Net cash flow from investing activities (100,097) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on notes payable (40,259) Net cash flow from financing activities (40,259) DECREASE IN CASH (62,266) CASH - Beginning of year 684,532 CASH - End of year $ 622,266 Cash $ 152,925 Cash restricted to revolving loan fund 469,341 Total cash $ 622,266 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 8,192 Income taxes $ - See accompanying notes to financial statements. R Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note 1: Summary of Significant Accounting Policies Nature of operations Beartooth Resource Conservation and Development Area, Inc. (BRCDA) is a governmental nonprofit corporation organized to improve the quality of life in the counties of Big Horn, Carbon, Stillwater, Sweet Grass, and Yellowstone. BRCDA accomplishes this objective through a comprehensive and coordinated effort of local citizens, and by providing local decision makers with technical information and the necessary access to resources to better manage, protect and utilize the area's natural and human resources. Since BRCDA's board of directors is appointed by the conservation districts, board of county commissioners and town and city councils of the aforementioned counties, it is defined as a governmental not-for-profit. In 1996, the Economic Development Administration of the US Department of Commerce designated BRCDA the Economic Development District for the region. BRCDA operates a Community Development Block Grant (CDBG), a Revolving Loan Fund (RLF) and an Intermediary Relending Program and Montana Board of Housing (IRP/MBOH) to assist companies with their financing needs. Basis of Accounting The financial statements of the Organization have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States. Change in Accounting Policy On June 21, 2018, the FASB issued ASU 2018-08, Not -for -Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance far Contributions Received and Contributions Made. The amendments in this ASU assist in (1) evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) subject to Subtopic 958-505 or as exchange (reciprocal) transactions subject to Accounting Standards Codification 606 and (2) determining whether a transaction is conditional, which affects the timing of revenue recognized. The Organization has applied the amendments in this ASU on a modified prospective basis. There was no change on opening balances of net assets and no prior period results were restated. The amendments in this ASU also apply to both resources received by a recipient and resources given by a resource provided. Note that for transactions in which the Organization serves as a resource provider, the effective date for the amendments in ASU 2018-08 are effective for fiscal years beginning after December 15, 2019. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU, as amended, provides comprehensive guidance on the recognition of revenue from customers arising from the transfer of goods and services, guidance on accounting for certain contract costs, and new disclosures. The new standard supersedes current revenue recognition requirements in FASB Accounting Standards Codification {ASC} Topic 605, Revenue Recognition, and most industry -specific guidance. When adopted, the amendments in the ASU must be applied using one of two retrospective methods. ASU No. 2014-09 is effective for nonpublic entities for annual periods beginning after December 15, 2019. The Organization is currently evaluating the impact of the provisions of ASC 606. 7 Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) New Accounting Pronouncements (Continued) In February 2015, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU provides guidance on the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and new disclosures on key information about leasing arrangements. The new standard supersedes current leases accounting in FASB Accounting Standards Codification (ASC) Topic 840, Leases. When adopted, the amendments in the ASU must be applied using a modified retrospective approach. ASU No. 2016-02 is effective for nonpublic companies for annual periods beginning after December 15, 2020. The Organization is currently evaluating the impact of the provisions of ASC 842. Accounts Receivable Accounts receivable consist primarily of grants and membership dues receivable. The Organization has elected to record bad debts using the direct write-off method. Generally accepted accounting principles require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. There were no credit losses relating to accounts receivable in 2018. Loans Receivable Loans receivable are stated at the amount reasonably expected to be collected. The Organization maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific loan receivables: payment history, status of loan, borrower ability to pay, historical losses, current economic conditions and collateral. Based on management's assessment, the Organization provides for estimated uncollectible amounts through a charge to earnings and a credit to the valuation allowance. Balances that remain outstanding after the Organization has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to loan accounts receivable. Property and Equipment All acquisitions and improvements of property and equipment of $1,000 or more are capitalized while all expenditures for repairs and maintenance that do not materially prolong the useful lives of assets are expensed. Purchased property and equipment is carried at cost. Donated property and equipment is carried at the approximate fair value at the date of donation. Depreciation is computed using the straight-line method over the estimated lives of the assets. 0 Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Net Assets Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor - imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Net assets without donor restrictions: Net assets available for use in general operations and not subject to donor (or certain grantor) restrictions. Net assets with donor restrictions: Net assets subject to donor- or grantor -imposed restrictions. Some donor -imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor -imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. Donor -imposed restrictions are released when a restriction expires; that is, when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both. Grant and Contribution Revenue Grants and contributions are considered available for general use unless specifically restricted by the donor. Grants and contributions received are recorded as support with donor restrictions or support without donor restrictions, depending on the existence and nature of the stipulated restrictions. Grants and contributions that are with donor restrictions are reported as increased in net assets with donor restrictions, which are reclassified to net assets without donor restrictions at the point when a stipulated time restriction ends or a purpose restriction is accomplished. Advertising and Promotion Advertising and promotion costs are charged to operations when incurred. There were no advertising and promotion expenses incurred during the year ended December 31, 2019. Income Taxes The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Organization's tax-exempt purpose is subject to taxation on unrelated business income. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and have been classified as organizations that are not private foundations. The Organization is also exempt from Montana income taxes. 0 Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Income Taxes (Continued) Penalties and interest assessed by income taxing authorities are included in management and general expenses, if applicable. The Organization has no interest and penalties related to income taxes for the year ended December 31, 2019. The Organization's federal returns are subject to examination generally for three years after they are filed. Functional Allocation of Expenses The costs of providing various programs and other activities have been summarized on a functional basis in the statement of activities and in the statement of functional expenses. Accordingly, certain costs have been allocated among the program services and supporting activities benefited. When expenses cannot be directly assigned to a function, management uses informal time studies and allocations of similar expenses when determining the functional allocation. Estimates Management uses estimates and assumptions in preparing the financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Actual results could differ from those estimates. The most significant estimate in the financial statements relates to the allowance for loan losses account. This estimate may be adjusted as more current information becomes available and any adjustment could be significant. Subsequent Events The Organization's management has evaluated events and transactions for potential recognition or disclosure in the financial statements through December 23, 2020, which is the date the financial statements were available to be issued. There was one subsequent type events identified by management that is required to be disclosed. Beginning in March 2020, the United States economy began suffering adverse effects from the COVID 19 Virus Crisis ("CV19 Crisis"). As of the date of issuance of the financial statements, the Organization had not yet suffered material adverse impact from the CV19 Crisis. The future impact of the CV19 Crisis on the Organization cannot be reasonably estimated at this time. 10 Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note Z: Liquidity and Availability of Financial Resources The Beartooth Resource Conservation and Development Area, Inc. has $184,566 of financial assets available within one year of the statement of financial position date consisting of cash of $152,925 and trade accounts receivable of $31,641. None of the above -listed financial assets are subject to donor or other contractual restrictions that make them unavailable for general expenditure within one year of the statement of financial position date. The trade accounts receivable and short-term loans receivable (net of allowance for doubtful accounts) are subject to time restrictions, but will be collected within one year. The Organization has a goal to maintain financial assets, which consist of cash and short-term receivables, on hand to meet 90 days of normal operating expenses (total expenses, less depreciation and bad debts), which are, on average, approximately $95,000. As part of its liquidity management, the Organization monitors and maintains excess cash in a separate savings account. Note 3: Loans Receivable The Organization was approved by the Economic Development Administration of the US Department of Commerce to establish a revolving loan fund. In addition, the Organization administers CDBG and IRP/MBOH loans. Outstanding loans receivable as of December 31, 2019, are as follows: LOAN FUND EDA $ 100,429 CDBG 834,514 Fromberg CDBG 12,766 IRP 505,665 2022 1,453,374 Less: Allowance for loan losses (422,170) Thereafter 1,031,204 Less: Current portion (337,3911 Long-term portion $ ..69.3813 Loans receivable mature as follows: Year: 2019 $ 759,561 2020 55,423 2021 44,808 2022 47,020 2023 46,968 Thereafter 499,594 $ 1453 374 11 Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note 3: Loans Receivable (Continued) The terms of the loans receivable indicate that if any payments are past due (or not current on payments), the entire balance of the loan becomes payable in full immediately. Management defines delinquent or impaired as any loan with past due payments. Therefore, all delinquent loans are included in the current portion of the loans receivable. The Organization's total investment in loans with delinquent status is $518,830. The Organization recognizes interest income on the loans when it is earned in accordance with the accrual basis of accounting. Interest rates on the loans range from 0.00% to 9.72% and total interest income on loans receivable for the year ended December 31, 2019, was $58,223. It is the Organization's policy to accrue interest on current loans and loans which are delinquent by less than one year. Interest accrual ceases after Loans become delinquent by over one year. The allowance is determined by evaluating delinquent loans and the collectability of loans based on the collateral. Activity in the allowance for loan losses account for the year ended December 31, 2019, is as follows: Balance, January 1, 2019 $ 424,778 Collections (2,508) Balance, December 31, 2019 $ 422,170 Note 4: Property and Equipment A summary of property and equipment is as follows as of December 31, 2019: PROPERTY AND EQUIPMENT Vehicles Machinery and equipment LESS ACCUMULATED DEPRECIATION FOR: Vehicles Machinery and equipment Tota I December 31, December 31, 2018 Additions Disposals 2019 $ 20,000 $ - $ - $ 20,000 14,718 - (9,539) 5,179 34,718 - (9,539) 25,179 5,998 4,002 - 11,000 14,718 - (9,539) 5,179 21,716 4,002 (9,539) 15,179 $ 13,002 $ 9,000 12 Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note 5: Notes Payable The Organization has the following notes payable as of December 31, 2019: Note payable to the U.S. Department of Agriculture (USDA), bears interest at a rate of 1% per year, 30 -year note with principal and interest payments due annually, matures November 2034. Note payable to the Board of Investments of the State of Montana, bears interest at a rate of 2% per year, 30 -year note with principal and interest payments due quarterly, matures November 2034. Note payable to Bank of Joliet, bears interest at a rate of 4% per year, four-year note with principal and interest payments due monthly, matures June 2021, secured by Chevrolet Equinox. Less: Current portion Long-term portion $ 441,333 153,514 4,323 599,170 (40,461) $ 558,709 Scheduled principal payments on long-term debt at December 31, 2019, including current maturities, are summarized as follows: 2019 $ 40,461 2020 37,450 2021 37,310 2022 37,778 2023 38,246 Thereafter 407,925 $ 599,170 Note 6: Retirement Plan The Organization maintains an IRA retirement plan for its employees. Employees become eligible for the retirement plan if they are a full-time employee and have completed a 90 day probation period. For 2019, the Organization matched up to 3% of eligible employee contributions. Retirement plan expense for the year ended December 31, 2019, was $5,111. 13 Beartooth Resource Conservation and Development Area, Inc. Notes to Financial Statements Note 7: Concentration of Credit Risk The organization maintains cash balances at financial institutions where the accounts are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. At certain times during the year, cash balances were in excess of FDIC coverage. The organization has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk on cash. Two loans receivable had balances at December 31, 2019, that exceeded 10Y6 of total loans receivable. These loans receivable comprised 18.9% and 10.2% of total loans receivable. One of these loan receivables that comprises 18.9% of the total loans receivable is in a delinquent status as regular monthly payments were not being made as of year-end. 14